Developing an Effective Dealership Insurance Program AutoCPAGroup Spring Conference San Juan, Puerto Rico

Presenters Today Steven P. Gibson President Dealer Risk Services

The Dealership World Uniqueness of the Industry Sales Volume Monthly Analysis Entrepreneurial Spirit of Dealers Resiliency of the Dealers Able to Withstand Disaster Weather Events Economic Downturns Industry Challenges

The Challenges Pitfalls and Weaknesses Tremendous Amount of Activity High Turnover Lack of Corporate Structure Versus Other Industries Compliance and Loss Control Monthly Analysis Short Planning/Analysis Cycle

Balancing Superior Coverage with Affordable Premiums Securing comprehensive coverage at the most affordable cost Understand how insurance companies work Methods they use to predict rate risk

The Insurance Company Model Like any business…an Insurance Company’s financial success is based on taking in more money in premium than they pay out in claims…

Claims and Premiums Insurance Companies look at many rating factors…but, their main focus is on Loss Ratios…

Controlling Insurance Costs Understanding the relationship between premiums and claims is the first step in controlling costs…

What Insurers Look For Frequency of Claims Claims Trends Recurring Events View Management by their Reaction to Claims Immediate Responses to Accidents Proactive and Preventative Measures

Determining Your Dealership Loss Pick To predict where we’re going…we have to understand where we’ve been. Take a look at the past…and review claims from a historical perspective. Review 5 to 7 Years of Claims

Examining Dealership Claims Map out your Loss Experience by Line Look for trends in claims type/location Auto Accidents Premise Slip & Fall Garagekeepers Claims F & I Related Claims Document all claims over $10K with Management Response to control future claims.

Lowering Premiums Risk Retention Risk Reduction Use of Deductibles Retention Programs Risk Reduction Loss Control Measures

Claims Strategies Initiate Quarterly Claims Reviews Consult with Counsel In House Outside Firm Review with Insurer Claims Manager & Adjusters Review Settlements & Options Open Claims & Reserves

Risk Management Strategies Develop Specific Strategies Initiate Risk Management Techniques Assign a Risk Management & Safety Committee Analyze Claims for “How & Why” Develop Internal Reviews & Responses Incident Reports Preventive Measures

Risk Management Specifics Examine Operations & Procedures Outsource Loaner Vehicles Limit or Eliminate Demos Standardize Test Drives Develop Inventory Controls Control Spot Deliveries Review and Audit F & I Procedures and Profits

Risk Management Specifics Motor Vehicle Records Run MVRs Annually Review Quarterly for Drivers with “issues’’ Mandatory for All New Hires Develop Accident Reviews & Disciplinary Action Employment Practices Develop Hiring/Termination Procedures Be “Honest” with Annual Reviews

Risk Management Specifics Review All Forms Utilize In-House Counsel State and National Associations Demo Agreements Loaner Agreements Buyers Documents & Agreements Arbitration Agreements Employment Agreements

Disaster and Crisis Management Develop Disaster & Crisis Management Procedures Natural Disasters Hurricanes Tornados Fires Man Made Crises Disgruntled Customers Employee Problems

Disaster Management

Crisis Management

Crisis Examples In Miami, a customer was unhappy with the deal he got at a Ford Dealership. He drove his car into the dealership…INTO THE DEALERSHIP…got out, doused the car with a flammable…lit the match…and went outside and sat on the curb… Car burned…dealership burned…Customers and Employees were shocked and running…1M in damage to the Dealership. BE PREPARED…PROTECT YOUR PEOPLE, PROPERTY & REPUTATION.

How Much Risk to Assume? Understand your own tolerance Understand your Loss Pick Evaluating loss trends and loss Projections Determine economics of Deductibles and Retentions

Developing Specifications Begin the process 120 days prior to renewal Develop an RFP for the marketplace Update Building and BPP Values Verify with Contractor Review Business Interruption Values Discuss “claims scenarios” with CPA and Operations Team

Critical Coverage Areas Examine Coverage Levels in Critical Areas Crime Coverage – Employee Dishonesty Employment Practice Liability Coverage Third Party Liability Coverage Umbrella Coverage Limits Discuss Limits with Defense Counsel and CP

Identifying the Market Identify and Understand the Garage Insurance marketplace Who are the Players/Insurers Direct Writers National Carriers Regional Carriers

Keys to Effective Bid Specifications Offer an organized specification with consistent data Include Forms Demo Agreements Test Drive Procedures Loaner Agreements Include currently valued Loss History with analysis

Keys to an Effective Bid Process Consider an Industry Consultant to reach the whole market Include the coverage & deductibles desired…using your Loss Pick as a guide Meet with Insurance Company Underwriters and Claims Managers Utilize Coverage Spreadsheets to Assist in Analyzing the Offerings Negotiate Premiums, Deductibles & Coverage issues

Explore Alternative Premium Options Captives and Alternative Risk Programs Group Captives Cell Captives Single Parent Captives Large Deductible and Retro Plans

Coverage Outside the Box Just because your Insurer/Agent doesn’t offer a coverage, does not mean it isn’t available in the Marketplace. Insurance Industry has a very broad scope of products.

Coverage Outside the Box Deductible and Aggregate Buy Back Programs Property/Windstorm Deductibles Inventory Weather Aggregates DIC Coverage Business Interruption for Flood

Coverage Outside the Box 831b Captives Explore various Domiciles and Format Property CAT Deductible Buy Back Policies Inventory Weather Policies Self Insured Policies

Coverage Outside the Box Stand Alone Professional Coverage Customized policy verbiage Broad Coverage Trigger Security & Privacy Protection Increasing area of Exposure Cost of Notification & Crisis Management Directors & Officers Protection Minority Partners Suits

Summary Use an Expert to Help You Understand and Negotiate with the Dealership Insurance Market Be aware of your losses. Keep track of expenses & reserve changes to old losses Explain large losses & new loss control measures to Insurance Companies

Summary Explore Premium Options – Look carefully at your loss experience & analyze the economics of the risk you are assuming Think outside the box for unique coverage that meets your special needs

Questions?

Thank You!